Form 1099-S: Proceeds from Real Estate Transactions

What is Form 1099-S?

Form 1099-S is used to report the sale or exchange of real estate. This form must be filed for transactions that involve the sale or exchange of ownership interest in certain types of property, including:

• Land, whether it’s developed or undeveloped, including air space.
• Permanent establishments like residential, commercial, or industrial buildings.
• Condominium units, fixtures, common areas, and associated land.
• Shares in a cooperative housing corporation.
• Non-contingent interests in standing timber.

Form 1099-S is required whenever ownership in these types of real estate or related property is transferred for money, property, services, or a combination.

Who Must File Form 1099-S?

Form 1099-S, which reports the sale or exchange of real estate, must be filed by the person responsible for closing the transaction. The responsibility to file can vary based on the specifics of the transaction, as outlined below:

• Person Responsible for Closing the Transaction

  If you are the person responsible for closing the transaction, you must file Form 1099-S. When a Closing Disclosure is used under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the person listed as the settlement agent on that document is considered responsible. The Closing Disclosure replaces the HUD-1 Settlement Statement and the final Truth-in-Lending (TIL) statement, combining them into one form under the Real Estate Settlement Procedures Act (RESPA) and the Federal Truth in Lending Act.

  If no Closing Disclosure is used or no settlement agent is listed, the person who prepares a Closing Disclosure that identifies the transferor and transferee, describes the property transferred, and details how proceeds are to be disbursed is responsible for filing.

  If no Closing Disclosure is used or if multiple disclosures exist, then the responsibility goes to one of the following (in order):

  • Transferee’s Attorney: If the buyer’s attorney is present when the payment is made or helps prepare the documents to transfer ownership, they must file the form.
  • Transferor’s Attorney: If the buyer’s attorney is not responsible, the seller’s attorney takes over the duty if they’re involved in the payment or document preparation.
  • Disbursing Title or Escrow Company: If neither attorney applies, then the title or escrow company most involved in handling the money must file the form.

  If more than one attorney qualifies, the one with the most involvement is responsible.

• If No One is Responsible for Closing the Transaction

  If no one is explicitly responsible for closing the transaction, the responsibility to file Form 1099-S falls in the
  following order:

  • Mortgage Lender: The lender providing new funds secured by the real estate, with priority given to the lender providing the most funds.
  • Transferor’s Broker: The broker who contracts with the transferor and is compensated for the transaction.
  • Transferee’s Broker: The broker significantly involved in preparing or presenting the offer to acquire the property.
  • Transferee: The person acquiring the greatest interest in the property.

• Designation Agreement

  You can decide who will file Form 1099-S by creating a written agreement before or at the time of closing, known as a designation agreement. This agreement allows you to name the individual responsible for filing Form 1099-S. The designated person must sign the agreement to assume official responsibility. The following individuals can be designated to file Form 1099-S with the IRS: the person responsible for closing the transaction, the buyer’s or seller’s attorney, the title or escrow company that managed most of the funds, and the mortgage lender. It is not necessary for all parties involved in the transaction to sign the agreement. This agreement must:

  • Identify the designated filer by name and address.
  • Include the names and addresses of all parties to the agreement.
  • Be signed and dated by all parties involved.
  • Include the names and addresses of the transferor and transferee.
  • Provide sufficient details to identify the property.

Each signatory must keep a copy of the agreement for a period of four years.

Bandit Tip: For each real estate transaction, it is really important to ensure that only one individual is responsible for filing Form 1099-S, and only one Form 1099-S is submitted for each transferor.

What are the Exceptions to filing Form 1099-S?

Form 1099-S is used to report the sale or exchange of real estate. However, there are several exceptions where you're not required to file Form 1099-S, unless you choose to do so. Here are the key exceptions:

• Sale of Principal Residence
• Transfers by Corporations or Government Entities
• Non-Sale Transactions
• Foreclosures or Debt Satisfaction
• De Minimis Transfers (Less than $600)
• Certain Property Types Not Related to Real Estate Sales

What information must be reported on Form 1099-S?

Form 1099-S requires specific information to be reported to the IRS, including the closing date of the transaction, the gross proceeds, the property's address, indicate in the form whether the transferor is a foreign person (nonresident alien, foreign partnership, foreign estate, or foreign trust), and the buyer’s portion of real estate tax paid in advance.

Click here to learn more about the Form 1099-S instructions.

What is the deadline to file Form 1099-S?

The Form 1099-S deadline to file with the IRS is no later than March 31, 2025 for the 2024 Tax Year. In addition to filing with the IRS, a recipient copy must be provided to the transferors. The deadline to distribute copies of Form 1099-S is February 17, 2025.

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